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To Join or Not to Join? Factors Influencing Employee Share Plan Membership in a Multinational Corporation

  • Alex Bryson
  • Richard Freeman

Many firms encourage employees to own company stock through share plans that subsidize the price at favorable rates, but even so many employees do not buy shares. Using a new survey of employees in a multinational with a share ownership plan, we find considerable variation in joining among observationally equivalent workers and explore the reasons for the variation. Participation in the plan is higher the greater the potential pay-off from joining the share plan, which indicates that rational economic calculations affect the decision to join. But there is also evidence that psychological factors affect the decision to join. Some nonmembers say they intend to join in the future, which means they forgo the benefits of immediate membership. The proportion of workers who purchase shares varies across workplaces beyond what we predict from worker characteristics. This suggests that coworker behavior influences decisions. Indeed, workers say that they pay most attention to other workers and little attention to company HR management in their decision on joining.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1001.

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Date of creation: Sep 2010
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Handle: RePEc:cep:cepdps:dp1001
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